F.

Local Government Unit

Alvarez vs. Guingona

Facts: A petition questioning the validity of RA 7720 an act converting the Mun. of Santiago into an Independent
Component City mainly because (1) it fell below the required annual income of 20M and (2) it did not originate
exclusively in the HOR as mandated by the Constitution.
Internal Revenue Allotments – The annual income of a LGU shall include the IRA. The Certification issued by the
Bureau of Local Government Finance of the DOF not accurate as the it was not included the IRA.

Local Government Unit – is a political subdivision of the State which is constituted by law and possessed of
substantial control over its own affairs. Remaining to be an intra sovereign subdivision of one sovereign nation, but
not intended, however, to be an imperium in imperio, the LGU is autonomous in the highly centralized in Manila, is
thereby deconcentrated, enabling especially the peripheral LGU to develop not only at their own pace and discretion
but also with their own resources and assets.

The vesting of duty, responsibility, and accountability in every LGU is accompanied with a provision of reasonable
adequate resources to discharge its powers and effectively carry out its functions. Availment of such resources is
effectuated through the vesting of in every LGU of:
1. The right to create and broaden its own resources of revenue;
2. The right to allocate a just share in national taxes, such share being in the form of IRA;
3. The right to be given its equitable share in the proceeds of the utilization and development of the national
wealth, if any, within its territorial boundaries.

The IRAs are items of income because they form part of the gross accretion of the funds of the LGU. The IRAs
regularly and automatically accrue to the Local Treasury without need of any further action on the part of the LGU.

Section 450(c) of the LGC: “ the average annual income shall include the income accruing to the General Fund,
Exclusive of Special Funds, Transfers, and Non-Recurring Income.
IRAs are a regular, recurring item of incomne.

Compliance with the Constitution

- It cannot be denied that HB 8817 was filed in the HOR first before SB 1243 was filed in the Senate.

G. Local Autonomy

EO 292 (Sec.1, Chapter I, Title XII)

- Declaration of Policy. - The State shall ensure the autonomy of local governments. For this purpose, it shall
provide for a more responsive and accountable local government structure instituted through a system of
decentralization.
- The allocation of powers and resources to local government units shall be promoted, and inter-local
government grouping, consolidation and coordination of resources shall be encouraged.
- The State shall guarantee the local government units their just share in national taxes and their equitable
share in proceeds from the use of natural resources, and afford them a wider latitude for resources
generation.

Pimentel vs. Aguirre

Facts:
- Petition seeking to annul Section 1 of AO 372, insofar as it requires LGU to reduce their expenditures by 25%
of their authorized regular appropriations for non-personal services.
(Because this
- President Estrada issued AO 43, amending Section 4 of AO 372 by reducing to 5% the amount of internal
revenue allotment to be withheld from the LGU.

RULING
- The Constitution vests the President with the power of supervision, not control over LGU.
- Such power enables him to see to it that LGUs and their officials execute their tasks in accordance with law.
- While he may issue advisories and seek their cooperation in solving economic difficulties, he cannot prevent
them from performing their tasks and using available resources to achieve their goals.
- He may not withhold or alter any authority or power given them by the law.
- Thus, the withholding of a portion of internal revenue allotments legally due them cannot be directed by
administrative fiat.
SUPERVISION VS. CONTROL
SUPERVISION - means overseeing or the power or authority of an officer to see that subordinate
officers perform their duties. If the latter fail or neglect to fulfill them, the former may take such action or
step as prescribed by law to make them perform their duties.
(in Drilon vs. Lim, Supervising officials merely see to it that the rules are followed, but they themselves do not
lay down such rules, nor do they have the discretion to modify or replace them. If the rules are not observed,
they may order the work done or redone, but only to conform to such rules. They may not prescribe their
own manner of execution of the act. They have no discretion on this matter except to see to it that the rules
are followed.)
CONTROL – means the power of an officer to alter or modify or nullify or set aside what a
subordinate officer has done in the performance of his duties and to substitute the judgment of the former for
that of the latter.

MEMBERS OF THE CABINET VS. ELECTED

MEMBERS OF THE CABINET – and other executive officials are merely alter egos. As such they are
subject to the power of control of the President, at whose will and behest they can be removed from office;
or their actions and decisions changed, suspended, or reversed.
HEADS OF POLITICAL SUBDIVISION – are elected by the people. Their sovereign powers emanate
from the electorate, to whom they are directly accountable. By Constitutional fiat, they are subject to the
President’s Supervision only, not control, so long as their acts are exercised within the sphere of their
legitimate powers. By the same token, the President may not withhold or alter any authority or power given
them by the Constitution and the law.

LOCAL AUTONOMY
- A more responsive and accountable local government structure instituted through a system of
decentralization.
- The grant of autonomy is intended to “break up the monopoly of the National Government over the affairs of
local governments, to end the relation of partnership and interdependence between the central administration
and LGUs.
- Autonomy is either:
(1) DECENTRALIZATION OF ADMINISTRATION - when the central government delegates administrative
powers to political subdivisions in order to broaden the base of government power and in the process to
make local governments more responsive and accountable and ensure their fullest development as self-
reliant communities and make them more effective partners in the pursuit of national development and
social progress.
- It relieves the central government of the burden of managing local affairs and enables it to concentrate
on national concerns.
- The president exercises general supervision over them, but only to ensure that local affairs are
administered according to law. He has no control over their acts in the sense that he can substitute their
judgments with his own.

(2) DECENTRALIZATION OF POWER – involves an abdication (renunciation of power) of political power in the
favor of LGUs declared to be autonomous. In that case, the autonomous government is free to chart its
own destiny and shape its future with minimum intervention from central authorities.

LGU enjoys FISCAL AUTONOMY

- Fiscal autonomy means that local governments have the power to create their own sources of revenue in
addition to their equitable share in the national taxes released by the national government, as well as the
power to allocate their resources in accordance with their own priorities.

Withholding of IRA
- Unconstitutional. A basic feature of local fiscal autonomy is the AUTOMATIC release of the shares of LGUs in
the National internal revenue as mandated by the Constitution.
- The LGC provides that the release shall be made directly to the LGU concerned within 5 days after every
quarter of the year and SHALL NOT be subject to any lien or holdback that may be imposed by the national
government for whatever purpose.

PROVINCE OF BATANGAS VS. ROMULO

- Then president Estrada issued EO 48 entitled Establishing a Program for Devolution Adjustment and
Equalization, which was to facilitate the process of enhancing the capabilities of LGUs in the discharge of their
functions.
 - The Oversight Committee has been tasked to formulate appropriate rules and regulations for its
implementation.
- Devolution Adjustment and Equalization Fund was created.
- The fund was to be incorporated in the annual GAA starting 1999.
- The Devolution Fund in GAA was allotted with the provision that such amount shall be released to the LGUs
subject to the IRR that may be prescribed by the Oversight Committee.
Petitioner:
- It posits that to subject the distribution and release of the 5B portion of the IRA (Devolution fund) to
compliance with the IRR prescribed by the Oversight Committee, contravenes the explicit directive of the
Constitution that the LGUs share in the national taxes shall be automatically released to them.
Ruling:
- Section 6, Article X of the Constitution reads: “LGUs shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.”
- The provision mandates that (1) the LGUs shall have a “just share” in the national taxes; (2) the “just share”
shall be determined by law; and (3) the “just share” shall be automatically released to the LGUs.
- The FUND is part of the IRA or Just Share of the LGUs in the National Taxes.
- To subject its distribution and release to the vagaries of the IRR prescribed by the Oversight Committee
makes the release not automatic, a violation of the Constitutional and statutory mandate that the “just share”
of the LGUs shall be automatically released to them.

SAMPIANO VS. INDAR

Facts:
- An administrative complaint was filed against respondent Judge Indar in connection with the Order dated
Oct.11, 2014 authorizing complainant Sampiano to act and discharge duties to prevent paralysis to public
service pending determination of the controversy involving mayorship of the Mun. of Balabagan.
- He (the Judge) also asked the Chief Legal Counsel of PNB not to release the IRA for the Mun. until the
controversy has been finally resolved.
- Samnpiano considered the Order as a SUPER ORDER because it was not only issued ex-parte but also it
directed the PNB-Marawi to hold or defer the release of the IRA until ordered otherwise by the Court.
Ruling:
- The automatic release of the IRA under Section 286 is subject to exemption:
It does not prevent the proper court from deferring or suspending the release thereof to particular local
officials when there is a legal question presented in the court pertaining to the rights of the parties to receive
the IRA or to the propriety of the issuance of a TRO or a preliminary injunction while such rights are still
being determined.

PIMENTEL VS. OCHOA

Facts:
- DSDW issued AO 16 implementing guidelines for the renamed project of Conditional Cash Transfer Program
(CCTP) to Pantawid Pamilyang Pilipino Program (4Ps).
- A memorandum of agreement (MOA) executed by the DSDW with each participating LGU outlines the
obligation of both parties during the 5-year implementation of the CCTP.
Issue:
- WON the 21B CCTP budget allocation under the DSDW in the GAA 2011 violates the provision of the
Constitution because it recentralize to the national government the delivery of basic services already devolved
to the LGUs.
Ruling:
- Under the Philippine concept of Local Autonomy, the National Government has not completely relinguished all
its powers over local governments.
- Only administrative powers over local affairs are delegated to political subdivisions, to make governance more
directly responsive and effective at the local levels.
- But to enable the country to develop as a whole, the programs and policies effected locally must be
integrated and coordinated towards a common national goal. Thus, policy-setting for the entire country still
lies in the President and Congress.
H. PUBLIC CORPORATIONS

ACT No. 1459, Chapter 1, Section 3:

Public corporations are those formed or organized for the government of a portion of the state. Private corporations
are those formed for some private purpose, benefit, aim, or end, as distinguished from public corporations, which
have for their purpose the general good and welfare. Private corporations are divided into stock corporations and
nonstock corporations. Corporations which have a capital stock divided into shares and are authorized to distribute to
the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock
corporations. All other private corporations are nonstock corporations.

I. ELEMENTS of MUNICIPAL CORPORATIONS:

1. Legal creation or incorporation – there must be a law creating/authorizing the creation or incorporation of a
municipal corporation
2. Corporate name – name by which the corporation is known;
3. Inhabitants – people residing in the territory of the corporation;
4. Territory – land mass where the inhabitants reside together with internal and external waters and airspace
above the land and waters

J. TWO-FOLD CHARACTEROF A MUNICIPAL CORPORATION

1. Governmental
2. Proprietary

VETERANS FEDERATION OF THE PHILIPPINES VS. REYES

Facts:
- Petitioner claims that it is not a public or a governmental entity by a private organization, and that the DND
Dept. Circular No. 4 is an invalid exercise of control and supervision.

III. CREATION AND ABOLITION OF MUNICIPAL CORPORATION

Art. X of the 1987 Constitution

Section 1 – The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities,
municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as
hereinafter provided.

Section 7 – LGUs shall have be entitled to an equitable share in the proceeds of the utilization and development of
the national wealth within their respective areas, in the manner provided by law, including sharing the same with the
inhabitants by way of direct benefits.

Section 10 – No province, city, municipality, or barangay may be created, divided, merged, abolished, or its
boundary substantially altered, except in accordance with the criteria established in the LGU and subject to the
approval by a majority of the votes cast in a plebiscite in the political units directly affected.

Section 11 – The Congress may, by law, create special metropolitan political subdivisions, subject to the plebiscite as
set forth in Section 10 hereof.

b.1 Pelaez vs. Auditor General

- Since Jan.1, 1960, when RA 2370 became effective, barrios may not be created or their boundaries altered
nor their names changed except by Act of Congress or of the corresponding Provincial Board upon petition of a
majority voters in the areas affected, and the recommendation of the council of the municipality in which the
proposed barrio is situated. This statutory denial of the presidential authority to create a new barrio implies a
negation of the bigger power to create municipalities of which consists of several barrios.

Power of Control over Local Governments

- The power of control implies the right of the President to interfere in the exercise of such discretion as may
be vested by law in the officers of the Executive Dept, Bureaus, or Offices of the National Government.
- This power is denied by the Constitution to the Executive, insofar as Local Governments are concerned.
- The fundamental law permits him to wield no more authority than that of checking whether said local
governments or the officers thereof perform their duties as provided by statutory requirements.
b.2 Camid vs. Office of the President
- It has been said that municipal corporations may exists by prescription where it is shown that the community has
claimed and exercised corporate functions, with the knowledge and acquiescence of the legislature, and without
interruption or objection for period long enough to afford title by prescription.
- Although no charter is in existence, it is presumed that they were duly incorporated in the first place and that their
charters have been lost.
- With the promulgation of the LGC of 1991, the legal cloud was lifted over the municipalities created by Executive
Order but not judicially annulled. The de facto status of such municipalities deemed cured whatever legal defects to
title had.

f. Abolition
f.1 Sultan Usman Sarangani vs. Comelec
Ruling:
- Under the LGC of 1991, the abolition of a LGU may be done by Congress in the case of a province, city,
municipality or any other political subdivision.
- In the case of a barangay, except in Metropolitan Manila area and in cultural communities, it may be done by
the Sangguniang Panlalawigan or Sangguniang Panglungsod concerned subject to the mandatory requirement
of a plebiscite conducted for the purpose in the political units affected.

f.2 Salva vs. Makalintal

Facts:
- There was an ordinance declaring the abolition of Brgy. San Rafael and its merger with Brgy. Dacanlao, with
instructions to COMELEC to conduct the plebiscite as provided by LGC of 1991.
- The COMELEC resolution no. 2987 which provides for the rules and regulations governing the conduct of the
required plebiscite was not issued to the COMELEC’s quasi-judicial functions but merely as an incident of its
inherent administrative functions over the conduct of plebiscites.

POLICE POWER

Fernando vs. St. Scholastica

- Police power is the plenary power vested in the legislature to make statutes and ordinances to promote the
health, morals, peace, education, good order or safety and general welfare of the people.
- The state, through the legislature has delegated the exercise of police power to LGU, as agencies of the
State.
- This delegation of power is embodied in Section 16 of the LGC of 1991, known as the General Welfare Clause,
which has two branches:
1. General Legislative Power – authorizes the municipal council to enact ordinances and make regulations
not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties
conferred upon the municipal council by law.
2. Police Power Proper – authorizes the municipality to enact ordinances as may be necessary and proper
for the health and safety, prosperity, morals, peace, good order, comfort, and convenience of the
municipality and its inhabitants, and for the protection of their property.

For an Ordinance to be valid it must not only be within the corporate powers of the LGU to enact and pass according
to the procedure prescribed by law, it must conform to the following substantive requirements:
1. Must not contravene the constitution or any statute;
2. Must not unfair or oppressive;
3. Must not be partial or discriminatory;
4. Must not prohibit but may regulate trade;
5. Must be general and consistent with public policy; and
6. Must not be unreasonable.

To successful invoke the exercise of police power as the rationale for the enactment of an ordinance and to free it
from the imputation of constitutional infirmity; two tests have been used by the Court:
 1. Rational Relationship Test – laws or ordinances are upheld if they rationally further a legitimate
governmental interest. Under immediate review, governmental interest is extensively examined and the
availability of less restrictive measures is considered.
2. Strict Scrutiny Test – the focus is on the presence of compelling, rather than substantial, governmental
interest and on the absence of less restrictive means for achieving that interest.

The state may not, under the guise of police power, permanently divest owners of the beneficial use of their property
solely to preserve or enhance the aesthetic appearance of the community.

Compelling the respondents to construct their fence in accordance with the assailed ordinance is, thus, a clear
encroachment on their right to property, which necessarily includes their right to decide how best to protect their
property. It also appears that requiring the exposure of their property via a see-thru fence is violative of their right
to privacy.

ABATEMENT
- While the Sangguniang Bayan may provide for the abatement of a nuisance (LGC, Sec.49[ee]), it cannot
declare a particular thing as nuisance per se and order its condemnation. The nuisance can only be so
adjudged by judicial determination.

NUISANCE
- Art.694 of Civil Code: A nuisance is any act, omission, establishment, business, condition of property, or
anything else which:
1. Injures or endangers the health or safety of others; or
2. Annoys or offends the senses; or
3. Shocks, defies, or disregards decency or morality
4. Obstructs or interferes with the free passage of any public highway or street, or any body of water; or
5. Hinders or impairs the use of property.

Nuisance per se
- One which affects the immediate safety of persons and property and may be summarily abated under the
defined law of necessity.

Nuisance per accidens

- It may be so proven in a hearing conducted for that purpose.
- It is not per se a nuisance warranting its summary abatement without judicial intervention.

Public Nuisance
- Affects a community or neighborhood or any considerable number of persons, although the extent of
annoyance, danger or damage upon individuals may be unequal.
- It is public when it interferes with the exercise of public right by directly encroaching on public property or by
causing a common injury.

Private Nuisance
- One which violates only private rights and produces damages to but one or a few persons.
 Jesus is Lord vs City of Pasig
- The Municipality of Pasig needed an access road from E. R. Santos Street, a municipal road near the Pasig
Public Market, to Barangay Sto. Tomas Bukid, Pasig, where 60 to 70 houses, mostly made of light materials,
were located. The road had to be at least three meters in width, as required by the Fire Code, so that fire
trucks could pass through in case of conflagration.
- The municipality then decided to acquire 51 square meters out of the 1,791-square meter property of the
Cuancos.
- The plaintiff deposited with the RTC 15% of the market value of the property based on the latest tax
declaration covering the property. On plaintiffs motion, the RTC issued a writ of possession over the property
sought to be expropriated.
- The plaintiff caused the annotation of a notice of lis pendens at the dorsal portion of TCT under the name of
the Jesus Is Lord Christian School Foundation, Incorporated (JILCSFI) which had purchased the property.
- In its answer-in-intervention, JILCSFI averred that the plaintiffs exercise of eminent domain was only for a
particular class and not for the benefit of the poor and the landless. It alleged that the property sought to be
expropriated is not the best portion for the road and the least burdensome to it.
- JISCSFI argues that the offer should be made to the proper party, that is, to the owner of the property. It
noted that the records in this case show that as of February 1993, it was already the owner of the property.

RULING:
The exercise of the right of eminent domain, whether directly by the State or by its authorized agents, is
necessarily in derogation of private rights.

When the power is granted, the extent to which it may be exercised is limited to the express terms or clear
implication of the statute in which the grant is contained.

Section 19 of R.A. No. 7160 which reads:

SEC. 19. Eminent Domain. A local government unit may, through its chief
executive and acting pursuant to an ordinance, exercise the power of eminent domain for
public use, or purpose, or welfare for the benefit of the poor and the landless, upon
payment of just compensation, pursuant to the provisions of the Constitution and
pertinent laws;
Provided, however, That the power of eminent domain may not be exercised
unless a valid and definite offer has been previously made to the owner, and such offer
was not accepted:
Provided, further, That the local government unit may immediately take
possession of the property upon the filing of the expropriation proceedings and upon
making a deposit with the proper court of at least fifteen percent (15%) of the fair
market value of the property based on the current tax declaration of the property to be
expropriated:
Provided, finally, That the amount to be paid for the expropriated property shall
be determined by the proper court based on the fair market value at the time of the
taking of the property.

Article 35 of the Rules and Regulations Implementing the Local Government

Code provides:

ARTICLE 35. Offer to Buy and Contract of Sale. (a) The offer to buy private
property for public use or purpose shall be in writing. It shall specify the property sought
to be acquired, the reasons for its acquisition, and the price offered.
(b) If the owner or owners accept the offer in its entirety, a contract of sale shall
be executed and payment forthwith made.
(c) If the owner or owners are willing to sell their property but at a price higher
than that offered to them, the local chief executive shall call them to a conference for the
purpose of reaching an agreement on the selling price. The chairman of the
appropriation or finance committee of the sanggunian, or in his absence, any member of
the sanggunian duly chosen as its representative, shall participate in the conference.
When an agreement is reached by the parties, a contract of sale shall be drawn and
executed.
(d) The contract of sale shall be supported by the following documents:
(1) Resolution of the sanggunian authorizing the local chief
executive to enter into a contract of sale. The resolution shall specify the
terms and conditions to be embodied in the contract;
 (2) Ordinance appropriating the amount specified in the
contract; and
(3) Certification of the local treasurer as to availability of funds
together with a statement that such fund shall not be disbursed or spent
for any purpose other than to pay for the purchase of the property
involved.

The purpose of the requirement of a valid and definite offer to be first made to the owner is to encourage settlements
and voluntary acquisition of property needed for public purposes in order to avoid the expense and delay of a court
action.

The law is designed to give to the owner the opportunity to sell his land without the expense and inconvenience of a
protracted and expensive litigation.

A single bona fide offer that is rejected by the owner will suffice.

The expropriating authority is burdened to make known its definite and valid offer to all the owners of the property .
However, it has a right to rely on what appears in the certificate of title covering the land to be expropriated.

- The letter is not a valid and definite offer to purchase a specific portion of the property for a price certain. It
is merely an invitation for only one of the co-owners, Lorenzo Ching Cuanco, to a conference to discuss the
project and the price that may be mutually acceptable to both parties.
- There is no legal and factual basis to the CAs ruling that the annotation of a notice of lis pendens at the
dorsal portion of petitioners TCT No. PT-92579 is a substantial compliance with the requisite offer. A notice
of lis pendens is a notice to the whole world of the pendency of an action involving the title to or possession
of real property and a warning that those who acquire an interest in the property do so at their own risk and
that they gamble on the result of the litigation over it.

Public Necessity
- The taking to be valid must be for public use. As long as the purpose of the taking is public, then the power
of eminent domain comes into play.
- As just noted, the constitution in at least two cases, to remove any doubt, determines what is public use. One
is the expropriation of lands to be subdivided into small lots for resale at cost to individuals. The other is the
transfer, through the exercise of this power, of utilities and other private enterprise to the government.
- It is accurate to state then that at present whatever may be beneficially employed for the general welfare
satisfies the requirements of public use.
- The subject property is expropriated for the purpose of constructing a road. The respondent is not mandated
to comply with the essential requisites for an easement of right-of-way under the New Civil Code. Case law
has it that in the absence of legislative restriction, the grantee of the power of eminent domain may
determine the location and route of the land to be taken unless such determination is capricious and wantonly
injurious.
- Expropriation is justified so long as it is for the public good and there is genuine necessity of public character.
Government may not capriciously choose what private property should be taken.
- The respondent has demonstrated the necessity for constructing a road from E. R. Santos Street to Sto.
Tomas Bukid. The witnesses, who were residents of Sto. Tomas Bukid, testified that although there were
other ways through which one can enter the vicinity, no vehicle, however, especially fire trucks, could enter
the area except through the newly constructed Damayan Street.
- This is more than sufficient to establish that there is a genuine necessity for the construction of a road in the
area. After all, absolute necessity is not required, only reasonable and practical necessity will suffice.
BELUSO VS MUN. OF PANAY
- Petitioners argue that: contrary to Sec. 19 of R.A. No. 7160 of the Local Government Code, which provides
that a local government may exercise the power of eminent domain only by ordinance, respondents
expropriation in this case is based merely on a resolution.
RULING:
- Eminent domain, which is the power of a sovereign state to appropriate private property to particular uses to
promote public welfare, is essentially lodged in the legislature.
- while such power may be validly delegated to local government units (LGUs), other public entities and public
utilities the exercise of such power by the delegated entities is not absolute.
- In fact, the scope of delegated legislative power is narrower than that of the delegating authority and such
entities may exercise the power to expropriate private property only when authorized by Congress and
subject to its control and restraints imposed through the law conferring the power or in other legislations.
- Indeed, LGUs by themselves have no inherent power of eminent domain. Thus, strictly speaking, the power
of eminent domain delegated to an LGU is in reality not eminent but inferior since it must conform to the
limits imposed by the delegation and thus partakes only of a share in eminent domain. The national
legislature is still the principal of the LGUs and the latter cannot go against the principals will or modify the
same.
- The exercise of the power of eminent domain necessarily involves a derogation of a fundamental right. It
greatly affects a landowners right to private property which is a constitutionally protected right necessary for
the preservation and enhancement of personal dignity and is intimately connected with the rights to life and
liberty. Thus, whether such power is exercised directly by the State or by its authorized agents, the exercise
of such power must undergo painstaking scrutiny.

Requisites before a LGU can exercise the Power of Eminent Domain:

1. An ordinance is enacted by the local legislative council authorizing the local chief executive, in
behalf of the local government unit, to exercise the power of eminent domain or pursue
expropriation proceedings over a particular private property.

2. The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of
the poor and the landless.

3. There is payment of just compensation, as required under Section 9, Article III of the
Constitution, and other pertinent laws.

4. A valid and definite offer has been previously made to the owner of the property sought to be
expropriated, but said offer was not accepted.

Resolution will not suffice:

R.A. No. 7160 expressly requires an ordinance for the purpose and a resolution that merely expresses the
sentiment of the municipal council will not suffice.

A municipal ordinance is different from a resolution. An ordinance is a law, but a

resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific
matter. An ordinance possesses a general and permanent character, but a resolution is
temporary in nature. Additionally, the two are enacted differently -- a third reading is necessary
for an ordinance, but not for a resolution, unless decided otherwise by a majority of all
the Sanggunian members.

If Congress intended to allow LGUs to exercise eminent domain through a mere

resolution, it would have simply adopted the language of the previous Local Government
Code. But Congress did not. In a clear divergence from the previous Local Government Code,
Sec. 19 of R.A. [No.] 7160 categorically requires that the local chief executive act pursuant to an
ordinance.

As respondents expropriation in this case was based merely on a resolution, such expropriation is clearly
defective. While the Court is aware of the constitutional policy promoting local autonomy, the court cannot grant
judicial sanction to an LGUs exercise of its delegated power of eminent domain in contravention of the very law giving
it such power.
NPC VS. HEIRS OF SANGKAY
- NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity for
Mindanao. The project included the construction of several underground tunnels to be used in diverting the
water flow from the Agus River to the hydroelectric plants.
- the respondents, sued NPC in the RTC for the recovery of damages and of the property, with the alternative
prayer for the payment of just compensation. They alleged that they had belatedly discovered that one of the
underground tunnels of NPC traversed their land. That the underground tunnel had been constructed without
their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial,
industrial and residential value of their land; and that their land had also become an unsafe place for
habitation because of the loud sound of the water rushing through the tunnel and the constant shaking of the
ground, forcing them and their workers to relocate to safer grounds.
- The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit,
and had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the
subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the
existence of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate
or to construct a motorized deep well; and that they, as owners, had lost the agricultural, commercial,
industrial and residential value of the land.
ISSUE:
- WON entitled to just compensation as found by the RTC and CA.
- WON five-year prescriptive period already set in due to the construction of the underground tunnel having
been completed in 1979, the law applicable was Section 3(i) of Republic Act No. 6395, as amended, which
limits the action for recovery of compensation to five years from the date of construction.

RULING:
We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only to
an action for damages, and does not extend to an action to recover just compensation like this case. Consequently,
NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their land.
It would very well be contrary to the clear language of the Constitution to bar the recovery of just
compensation for private property taken for a public use solely on the basis of statutory prescription.

The action to recover just compensation from the State or its expropriating agency differs from the action for
damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken
in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been
attempted by the taking agency.

Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator. The
measure is not the takers gain, but the owners loss. The word just is used to intensify the meaning of the
word compensation in order to convey the idea that the equivalent to be rendered for the property to be taken shall
be real, substantial, full, and ample.

The action to recover just compensation is based on the Constitution while the action for damages is predicated on
statutory enactments. Indeed, the former arises from the exercise by the State of its power of eminent domain
against private property for public use, but the latter emanates from the transgression of a right.

The fact that the owner rather than the expropriator brings the former does not change the essential nature
of the suit as an inverse condemnation, for the suit is not based on tort, but on the constitutional prohibition against
the taking of property without just compensation.

TAKING
We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that
the owners were not completely and actually dispossessed.
It is settled that the taking of private property for public use, to be compensable, need not be an actual
physical taking or appropriation.
Indeed, the expropriators action may be short of acquisition of title, physical possession, or occupancy but
may still amount to a taking.
Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or
of the common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its
value.
It is neither necessary that the owner be wholly deprived of the use of his property, nor material whether the
property is removed from the possession of the owner, or in any respect changes hands.
FIXING OF JUST COMPENSATION
We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in
its decision.
Compensation that is reckoned on the market value prevailing at the time either when NPC entered or when it
completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness already caused
to the owners by NPCs entering without the intention of formally expropriating the land, and without the prior
knowledge and consent of the Heirs of Macabangkit.
NPCs entry denied elementary due process of law to the owners since then until the owners commenced the
inverse condemnation proceedings. The Court is more concerned with the necessity to prevent NPC from unjustly
profiting from its deliberate acts of denying due process of law to the owners. As a measure of simple justice and
ordinary fairness to them, therefore, reckoning just compensation on the value at the time the owners commenced
these inverse condemnation proceedings is entirely warranted.

CITY OF MANILA VS ALEGAR CORP

- The City Council of Manila passed Ordinance 8012 that authorized the City Mayor to acquire certain
lots belonging to respondents Alegar Corporation, for use in the socialized housing project.
- Alegar also pointed out that, while it declined the Citys initial offer, it did not foreclose the possibility of selling
the lots for the right price. The filing of the suit was premature because the City made no effort in good faith
to negotiate the purchase.
- The trial court pointed out that the City also failed to show that it exhausted all reasonable efforts to acquire
the lots through a negotiated sale. Article 35 of the Rules and Regulations Implementing the Local
Government Code provides that when property owners are willing to sell but for a higher price than that
offered, the local chief executive must confer with them for the possibility of coming to an agreement on the
price.

An expropriation proceeding of private lands has two stages:

first, the determination of plaintiffs authority to exercise the power of eminent domain in the context of the facts of
the case and,
second, if there be such authority, the determination of just compensation. The first phase ends with either an order
of dismissal or a determination that the property is to be acquired for a public purpose.

RULING:
1. The government must exhaust all reasonable efforts to obtain by agreement the land it desires. Its failure to
comply will warrant the dismissal of the complaint.

Here, the City of Manila initially offered P1,500.00 per sq m to the owners for their lots. But after the
latter rejected the offer, claiming that the offered price was even lower than their current zonal value, the
City did not bother to renegotiate or improve its offer. The intent of the law is for the State or the local
government to make a reasonable offer in good faith, not merely a pro forma offer to acquire the property.

2. The City insists that it made a deposit of P1.5 million with the RTC by way of advance payment on the lots it
sought to expropriate. By withdrawing this deposit, respondents may be assumed to have given their consent
to the expropriation.

But the advance deposit required under Section 19 of the Local Government Code constitutes an
advance payment only in the event the expropriation prospers. Such deposit also has a dual purpose: as pre-
payment if the expropriation succeeds and as indemnity for damages if it is dismissed. This advance payment,
a prerequisite for the issuance of a writ of possession, should not be confused with payment of just
compensation for the taking of property even if it could be a factor in eventually determining just
compensation. If the proceedings fail, the money could be used to indemnify the owner for damages.

Here, therefore, the owners withdrawal of the deposit that the City made does not amount to a
waiver of the defenses they raised against the expropriation. With the dismissal of the complaint, the amount
or a portion of it could be awarded to the owners as indemnity to cover the expenses they incurred in
defending their right.
FORTICH VS. CORONA
- This case involves a 144-hectare land located at San Vicente, Sumilao, Bukidnon, owned by the Norberto
Quisumbing, Sr. Management and Development Corporation (NQSRMDC), one of the petitioners.
- the land was leased as a pineapple plantation to the Philippine Packing Corporation, now Del Monte
Philippines, Inc. (DMPI), a multinational corporation, for a period of ten (10) years.
- during the existence of the lease, the Department of Agrarian Reform (DAR) placed the entire 144-hectare
property under compulsory acquisition and assessed the land value at P2.38 million.
- the Sangguniang Bayan of Sumilao, Bukidnon, on March 4, 1993, enacted Ordinance No. 24 converting or re-
classifying 144 hectares of land in Bgy. San Vicente, said Municipality, from agricultural to
industrial/institutional with a view of providing an opportunity to attract investors who can inject new
economic vitality, provide more jobs and raise the income of its people.
- Notwithstanding the foregoing favorable recommendation, however, on November 14, 1994, the DAR, thru
Secretary Garilao, invoking its powers to approve conversion of lands under Section 65 of R.A. No. 6657,
issued an Order denying the instant application for the conversion of the subject land from agricultural to
agro-industrial and, instead, placed the same under the compulsory coverage of CARP and directed the
distribution thereof to all qualified beneficiaries.
- RULING OF THE OP (WIN WIN RESOLUTION)
1. NQSRMDCs application for conversion is APPROVED only with respect to the approximately forty-four (44)
hectare portion of the land adjacent to the highway, as recommended by the Department of Agriculture.
2. The remaining approximately one hundred (100) hectares traversed by an irrigation canal and found to be
suitable for agriculture shall be distributed to qualified farmer-beneficiaries in accordance with RA 6657 or the
Comprehensive Agrarian Reform Law

ROXAS & CO. VS. CA

- This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the validity of the
acquisition of these haciendas by the government under Republic Act No. 6657, the Comprehensive Agrarian
Reform Law of 1988. (Date of Effectivity June 15, 1988)
- Before the laws effectivity, on May 6, 1988, petitioner filed with respondent DAR a voluntary offer to sell
Hacienda Caylaway pursuant to the provisions of E.O. No. 229. Haciendas Palico and Banilad were later
placed under compulsory acquisition by respondent DAR in accordance with the CARL.
- Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of Haciendas Palico
and Banilad from agricultural to non-agricultural lands under the provisions of the CARL.

MUNICIPALITY OF BIÑAN VS GARCIA

There are two (2) stages in every action of expropriation.

The first is concerned with the determination of the authority of the plaintiff to exercise the power of
eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order,
if not of dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the property
sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the complaint."
An order of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action
and leaves nothing more to be done by the Court on the Merits. So, too, would an order of condemnation be a final
one, for thereafter, as the Rules expressly state, in the proceedings before the Trial Court, "no objection to the
exercise of the right of condemnation (or the propriety thereof) shall be filed or heard.

The second phase of the eminent domain action is concerned with the determination by the Court of "the
just compensation for the property sought to be taken." This is done by the Court with the assistance of not more
than three (3) commissioners. The order fixing the just compensation on the basis of the evidence before, and
findings of, the commissioners would be final, too. It would finally dispose of the second stage of the suit, and leave
nothing more to be done by the Court regarding the issue.
Obviously, one or another of the parties may believe the order to be erroneous in its appreciation of the
evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party may seek reversal of the order by
taking an appeal therefrom.
BRGY SAN ROQUE VS HEIRS OF PASTOR
An expropriation suit is incapable of pecuniary estimation. Accordingly, it falls within the jurisdiction of the
regional trial courts, regardless of the value of the subject property.

It should be stressed that the primary consideration in an expropriation suit is whether the government or
any of its instrumentalities has complied with the requisites for the taking of private property. Hence, the courts
determine the authority of the government entity, the necessity of the expropriation, and the observance of due
process.13 In the main, the subject of an expropriation suit is the governments exercise of eminent domain, a matter
that is incapable of pecuniary estimation.

True, the value of the property to be expropriated is estimated in monetary terms, for the court is duty-bound
to determine the just compensation for it. This, however, is merely incidental to the expropriation suit. Indeed, that
amount is determined only after the court is satisfied with the propriety of the expropriation.

PHIL. COLUMBIAN ASSOC VS PANIS

- Philippine Columbian Association, petitioner herein, is a non-stock, non-profit domestic corporation and is
engaged in the business of providing sports and recreational facilities for its members. While Respondent are
the actual occupants of the land where petitioner’s office and facilities are located.
- petitioner instituted ejectment proceedings against herein private respondents.
- The City of Manila filed a complaint against petitioner before the Regional Trial Court for the expropriation of
the lot subject of the ejectment proceedings.
- Petitioner claims that expropriation of the lot cannot prosper because:
(1) the City of Manila has no specific power to expropriate private property under the 1987 Constitution; and
(2) assuming that it has such power, this was exercised improperly and illegally in violation of the Public use
requirement and petitioner's right to due process.

RULING
The City of Manila, acting through its legislative branch, has the express power to acquire private lands in the
city and subdivide these lands into home lots for sale to bona fide tenants or occupants thereof, and to laborers and
low-salaried employees of the city. That only a few could actually benefit from the expropriation of the property does
not diminish its public use character. It is simply not possible to provide all at once land and shelter for all who need
them.

Corollary to the expanded notion of public use, expropriation is not anymore confined to vast tracts of land
and landed estates. It is therefore of no moment that the land sought to be expropriated in this case is less than half
a hectare only.

Through the years, the public use requirement in eminent domain has evolved into a flexible concept,
influenced by changing conditions. Public use now includes the broader notion of indirect public benefit or advantage,
including in particular, urban land reform and housing.
CITY OF ILOILO VS LEGAZPI
the Sangguniang Panlungsod of the City of Iloilo enacted Regulation Ordinance No. 2001-037 granting authority to its
City Mayor to institute expropriation proceedings on Lot No. 935, registered in the name of Manuela Yusay for the
purpose of converting the same as an on-site relocation for the poor and landless residents of the city in line with the
citys housing development program.
Petitioner City of Iloilo, represented by Mayor Jerry P. Treas, filed an Amended Complaintfor Eminent Domain against
private respondents Heirs of Manuela Yusay, represented by Sylvia Yusay del Rosario and Enrique Yusay, Jr
petitioner says it deposited the amount of P2,809,696.50 with the Regional Trial Court of Iloilo, which is equivalent to
fifteen percent (15%) of the fair market value of the property sought to be expropriated based on its current tax
declaration.
It further argues that the duty to issue a Writ of Possession becomes a ministerial duty upon the trial court without
necessity of a hearing once the provisional deposit under Section 2 of Rule 67 has been complied with.

The requisites for authorizing immediate entry are as follows:

(1) the filing of a complaint for expropriation sufficient in form and substance; and
(2) the deposit of the amount equivalent to fifteen percent (15%) of the fair market value of the property to
be expropriated based on its current tax declaration.
Upon compliance with these requirements, the issuance of a writ of possession becomes ministerial.

The Court finds the Amended Complaint sufficient in form and substance, and the amount of P2,809,696.50
deposited with the Regional Trial Court of Iloilo is equivalent to fifteen percent (15%) [33] of the fair market value of
the property sought to be expropriated per current tax declaration.

Private respondents argue that petitioner waived its right to ask for the immediate possession of Lot No. 935
since it took the latter eight (8) months and twelve (12) days from the filing of the Amended Complaint, and nine (9)
months and thirteen (13) days from the filing of the Original Complaint, before it filed the Motion for Issuance of Writ
of Possession.

Petitioner did not waive its right. Section 19 of Rep. Act No. 7160 does not put a time limit as to when a local
government may immediately take possession of the real property. Said section provides that the local government
unit may take immediate possession of the property upon the filing of the expropriation proceedings and upon making
a deposit of at least fifteen percent (15%) of the fair market value of the property based on its current tax
declaration. As long as the expropriation proceedings have been commenced and the deposit has been made, the
local government unit cannot be barred from praying for the issuance of a writ of possession.

CITY OF MANDALUYONG VS AGUILAR

Petitioner sought to expropriate three (3) adjoining parcels of land the lots were classified by Resolution No.
125 of the Board of the Housing and Urban Development Coordinating Council as an Area for Priority Development for
urban land reform under Proclamation Nos. 1967 and 2284 of then President Marcos; as a result of this classification,
the tenants and occupants of the lots offered to purchase the land from respondents, but the latter refused to sell.

They alleged that the expropriation of their land is arbitrary and capricious, and is not for a public purpose;
the subject lots are their only real property and are too small for expropriation, while petitioner has several properties
inventoried for socialized housing;

RULING
Section 9 also exempts from expropriation parcels of land owned by small property owners. Petitioner argues
that the exercise of the power of eminent domain is not anymore conditioned on the size of the land sought to be
expropriated. By the expanded notion of public use, present jurisprudence has established the concept that
expropriation is not anymore confined to the vast tracts of land and landed estates, but also covers small parcels
of land. That only a few could actually benefit from the expropriation of the property does not diminish its public use
character. It simply is not possible to provide, in one instance, land and shelter for all who need them.

While we adhere to the expanded notion of public use, the passage of R.A. No. 7279, the Urban Development
and Housing Act of 1992 introduced a limitation on the size of the land sought to be expropriated for socialized
housing. The law expressly exempted small property owners from expropriation of their land for urban land
reform. R.A. No. 7279.

Small-property owners are defined by two elements: (1) those owners of real property whose property consists
of residential lands with an area of not more than 300 square meters in highly urbanized cities and 800 square meters
in other urban areas; and (2) that they do not own real property other than the same.
LAGCAO VS LABRA
In 1964, the Province of Cebu donated 210 lots to the City of Cebu. One of these lots was Lot 1029, situated
in Capitol Hills, Cebu City, with an area of 4,048 square meters. In 1965, petitioners purchased Lot 1029 on
installment basis.
But then, in late 1965, the 210 lots, including Lot 1029, reverted to the Province of Cebu. Consequently, the
province tried to annul the sale of Lot 1029 by the City of Cebu to the petitioners. This prompted the latter to sue the
province for specific performance and damages in the then Court of First Instance.
On July 9, 1986, the court a quo ruled in favor of petitioners and ordered the Province of Cebu to execute the
final deed of sale in favor of petitioners. On June 11, 1992, the Court of Appeals affirmed the decision of the trial
court. Pursuant to the ruling of the appellate court, the Province of Cebu executed on June 17, 1994 a deed of
absolute sale over Lot 1029 in favor of petitioners. Thereafter, Transfer Certificate of Title (TCT) No. 129306 was
issued in the name of petitioners and Crispina Lagcao.
After acquiring title, petitioners tried to take possession of the lot only to discover that it was already occupied
by squatters. Thus, on June 15, 1997, petitioners instituted ejectment proceedings against the squatters.
Then the demolition order was about to be implemented, Cebu City Mayor Alvin Garcia wrote two letter to the
MTCC, requesting the deferment of the demolition on the ground that the City was still looking for a relocation site for
the squatters.
During the suspension period, the Sangguniang Panlungsod (SP) of Cebu City passed a resolution which
identified Lot 1029 as a socialized housing site pursuant to RA 7279.

RULING:
There are two legal provisions which limit the exercise of this power: (1) no person shall be deprived of life,
liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws ]and
(2) private property shall not be taken for public use without just compensation.

The foundation of the right to exercise eminent domain is genuine necessity and that necessity must be of
public character. Government may not capriciously or arbitrarily choose which private property should be
expropriated. In this case, there was no showing at all why petitioners property was singled out for expropriation by
the city ordinance or what necessity impelled the particular choice or selection. Ordinance No. 1843 stated no reason
for the choice of petitioners property as the site of a socialized housing project.

Condemnation of private lands in an irrational or piecemeal fashion or the random expropriation of small lots
to accommodate no more than a few tenants or squatters is certainly not the condemnation for public use
contemplated by the Constitution. This is depriving a citizen of his property for the convenience of a few without
perceptible benefit to the public`

In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al. vs. City of Manila. w e ruled
that the above-quoted provisions are strict limitations on the exercise of the power of eminent domain by local
government units, especially with respect to (1) the order of priority in acquiring land for socialized housing and (2)
the resort to expropriation proceedings as a means to acquiring it.

Private lands rank last in the order of priority for purposes of socialized housing. In the same vein,
expropriation proceedings may be resorted to only after the other modes of acquisition are exhausted. Compliance
with these conditions is mandatory because these are the only safeguards of oftentimes helpless owners of private
property against what may be a tyrannical violation of due process when their property is forcibly taken from them
allegedly for public use.

We have found nothing in the records indicating that the City of Cebu complied strictly with Sections 9 and 10
of RA 7279. Ordinance No. 1843 sought to expropriate petitioners property without any attempt to first acquire the
lands listed in (a) to (e) of Section 9 of RA 7279. Likewise, Cebu City failed to establish that the other modes of
acquisition in Section 10 of RA 7279 were first exhausted. Moreover, prior to the passage of Ordinance No. 1843,
there was no evidence of a valid and definite offer to buy petitioners property as required by Section 19 of RA 7160.
We therefore find Ordinance No. 1843 to be constitutionally infirm for being violative of the petitioners right to due
process.
TAXATION
Presidential Decree 1079 requires a newspaper of general circulation. A newspaper of general circulation is published
for the dissemination of local news and general information; it has a bona fide subscription list of paying subscribers;
and it is published at regular intervals. The newspaper must not also be devoted to the interest or published for the
entertainment of a particular class, profession, trade, calling, race or religious denomination. The newspaper need not
have the largest circulation so long as it is of general circulation.

Presidential Decree 1079, however, does not require accreditation. The requirement of accreditation was imposed by
the Court only in 2001, through A.M. No. 01-1-07-SC or the Guidelines in the Accreditation of Newspapers and
Periodicals Seeking to Publish Judicial and Legal Notices and Other Similar Announcements and in the Raffle
Thereof. This circular cannot be applied retroactively to the case at bar as it will impair petitioners rights.

B.2 City of Olongapo vs. Stallholders of Public Market

On June 30, 1993, the Olongapo City Council enacted Ordinance No. 14 (Series of 1993), fixing the monthly
rental fees for the different stalls in the new public market. Respondents questioned the validity of said ordinance by
filing an appeal to the Secretary of Justice. The appeal was made pursuant to Section 187 of the Local Government
Code, which states:

SEC. 187. Procedure for Approval and Effectivity of Tax

Ordinances and Revenue Measures; Mandatory Public Hearings. –

The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions
of this Code:

Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof:

Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be
raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of receipt of the appeal:

Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the
accrual and payment of the tax, fee, or charge levied therein:

Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without
the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.

As grounds for their appeal, respondents alleged that the ordinance:

(1) violated Sections 130 and 186 of the Local Government Code as the rates fixed therein are unjust, excessive,
oppressive, confiscatory, not equitable, not based as far as practicable on the market vendors' ability to pay, and
contrary to declared national policy;
(2) was sought to be implemented despite lack of publication; and
(3) did not comply with "the essence and spirit of the public hearings.

Ruling of the CA, as affirmed by the SC:

Exhibits "4", "4-A", "5", "6", "7", "8", "9" and "10" attached to the Answer undisputedly show that proper
publication, posting in public places, and public hearings were complied with in accordance with the requirements of
the Local Government Code of 1991.
We find no genuine triable issue on this matter and therefore the trial court committed no reversible error in
rendering summary judgment thereon.
We agree with the RTC that the procedural requirements have been met by the City Council of defendant
Olongapo City in the enactment of the subject ordinance. There were publications, posting and public hearings as
shown by the aforementioned exhibits of defendants. The fact that appellants' views were not considered by the City
Council does not render the enactment of the ordinance invalid.
TAMANE VS. BA LEPANTO
Sources of Power
The power of local government units to impose taxes within its territorial jurisdiction derives from the
Constitution itself, which recognizes the power of these units to create its own sources of revenue and to levy taxes,
fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic
policy of local autonomy.

These guidelines and limitations as provided by Congress are in main contained in the Local Government
Code of 1991 (the Code), which provides for comprehensive instances when and how local government units may
impose taxes. The significant limitations are enumerated primarily in Section 133 of the Code, which include among
others, a prohibition on the imposition of income taxes except when levied on banks and other financial institutions.

The most well-known mode of local government taxation is perhaps the real property tax, which is governed
by Title II, Book II of the Code, and which bears no application in this case. A different set of provisions, found under
Title I of Book II, governs other taxes imposable by local government units, including business taxes. Under Section
151 of the Code, cities such as Makati are authorized to levy the same taxes fees and charges as provinces and
municipalities. It is in Article II, Title II, Book II of the Code, governing municipal taxes, where the provisions on
business taxation relevant to this petition may be found.

Section 143 of the Code specifically enumerates several types of business on which municipalities and cities
may impose taxes. These include manufacturers, wholesalers, distributors, dealers of any article of commerce of
whatever nature; those engaged in the export or commerce of essential commodities; contractors and other
independent contractors; banks and financial institutions; and peddlers engaged in the sale of any merchandise or
article of commerce. Moreover, the local sanggunian is also authorized to impose taxes on any other businesses not
otherwise specified under Section 143 which the sanggunianconcerned may deem proper to tax.

We can elicit from the Condominium Act that a condominium corporation is precluded by statute from
engaging in corporate activities other than the holding of the common areas, the administration of the condominium
project, and other acts necessary, incidental or convenient to the accomplishment of such purposes. Neither the
maintenance of livelihood, nor the procurement of profit, fall within the scope of permissible corporate purposes of a
condominium corporation under the Condominium Act.

Again, whatever capacity the Corporation may have pursuant to its power to exercise acts of ownership over
personal and real property is limited by its stated corporate purposes, which are by themselves further limited by the
Condominium Act. A condominium corporation, while enjoying such powers of ownership, is prohibited by law from
transacting its properties for the purpose of gainful profit.

Accordingly, and with a significant degree of comfort, we hold that condominium corporations are generally
exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks
to declare otherwise.

In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6 million
from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it averred
that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the
condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati
affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals.

The Court of Appeals reversed the RTC.

Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is liable
for local taxation because its act of maintaining the condominium is an activity for profit because the end result of
such activity is the betterment of the market value of the condominium which makes it easier to sell it; that Lepanto is
earning profit from fees collected from condominium unit owners; and that b.) Lepanto’s petition for review of the
decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it by Lepanto,
the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what Lepanto should
have done is to file an ordinary appeal under Rule 41.
ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising
original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a
condominium is liable for local taxation.
HELD:
1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by the
local treasurer is “to appeal with the court of competent jurisdiction” or in this case the RTC (considering the amount
of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original jurisdiction
and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a court higher in
rank to re-examine the final order or judgment of a lower court which tried the case now elevated for
judicial review. Here, the City Treasurer is not a lower court.
The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of Republic
Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises exclusive appellate
jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax
cases whether originally decided or resolved by them in the exercise of their original or appellate
jurisdiction.
2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners
redound to the owners themselves because the fees collected are being used for the maintenance of the condo.
Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on
Lepanto – it merely states that Makati is authorized to collect business taxes under the Local Government Code (LGC)
but no other reference specific reference to specific laws were cited.

CITY GOVT OF Q.C. VS. BAYANTEL

Facts:
Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under Republic Act (Rep. Act)
No. 3259... to establish and operate radio stations for domestic telecommunications, radiophone, broadcasting and...
telecasting.

Rep. Act No. 7160, otherwise known as the "Local Government Code of 1991" (LGC), took effect. Section 232 of the
Code grants local government units within the Metro Manila Area the power to levy tax on real properties... the same
Code... withdrew any exemption from realty tax heretofore granted to or enjoyed by all persons, natural or juridicaL...
barely few months after the LGC took effect, Congress enacted Rep. Act No. 7633, amending Bayantel's original
franchise.
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required
by law to pay.

In addition thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three percent (3%)
of all gross receipts of the telephone or other telecommunications businesses transacted under this franchise by the
grantee, its successors or assigns and the... said percentage shall be in lieu of all taxes on this franchise or earnings
thereof. Provided, That the grantee, its successors or assigns shall continue to be liable for income taxes payable
under Title II of the National Internal Revenue Code .... xxx.

It is undisputed that within the territorial boundary of Quezon City, Bayantel owned several real properties on which it
maintained various telecommunications facilities.

government of Quezon City,... enacted City Ordinance... imposing... a real property tax on all real properties in
Quezon City, and, reiterating in its Section 6, the withdrawal of exemption from real... property tax under Section 234
of the LGC

Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city from the roll of
taxable real properties. With its request having been denied, Bayantel interposed an appeal with the Local Board of
Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real
property taxes assessed against it by the Quezon City government.

Quezon City Treasurer sent out notices of delinquency... followed by the issuance of several warrants of levy against
Bayantel's properties preparatory to their sale at a public auction
Bayantel... filed with the RTC of Quezon City a petition for prohibition with an urgent application for a temporary
restraining order (TRO)

Issues:
[I]n declaring the real properties of respondent exempt from real property taxes notwithstanding the fact that the tax
exemption granted to Bayantel in its original franchise had been withdrawn by the [LGC]
Whether or not Bayantel's real properties in Quezon City are exempt from real property taxes under its legislative f...
ranchise;
Bayantel's franchise being national in character, the "exemption" thus granted under Section 14 of Rep. Act No. 3259
applies to all its real or personal properties found anywhere within the Philippine archipelago.
Ruling:
real properties of Bayantel, save those exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the
inevitable result was that all realties which are actually,... directly and exclusively used in the operation of its franchise
are "exempted" from any property tax.

Bayantel's franchise being national in character, the "exemption" thus granted under Section 14 of Rep. Act No. 3259
applies to all its real or personal properties found anywhere within the Philippine archipelago.
However, with the LGC's taking effect... the realty tax exemption... heretofore enjoyed by Bayantel under its original
franchise, but subsequently withdrawn by force of Section 234 of the LGC, has been restored by Section 14 of Rep.
Act No. 7633.

Bayantel... is only "liable to pay the same taxes, as any other persons or corporations on all its real or personal
properties, exclusive of its franchise."... there can really be no dispute that the power of the Quezon City Government
to tax is limited by Section 232 of the LGC which expressly provides that "a province or city or municipality within the
Metropolitan Manila Area may levy an annual... ad valorem tax on real property such as land, building, machinery,
and other improvement not hereinafter specifically exempted." Under this law, the Legislature highlighted its power to
thereafter exempt certain realties from the taxing power of local... government units. An interpretation denying
Congress such power to exempt would reduce the phrase "not hereinafter specifically exempted" as a pure jargon,
without meaning whatsoever. Needless to state, such absurd situation is unacceptable.
dmittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the LGC has already
withdrawn Bayantel's former exemption from realty taxes, Congress opted to pass Rep. Act No. 7633 using... exactly
the same defining phrase

"exclusive of this franchise" which was the basis for Bayantel's exemption from realty taxes prior to the LGC.
In plain language, Section 11 of Rep. Act No. 7633 states that "the grantee, its successors or assigns shall be liable to
pay the same taxes on their real... estate, buildings and personal property, exclusive of this franchise, as other
persons or corporations are now or hereafter may be required by law to pay." The Court views this subsequent piece
of legislation as an express and real intention on the part of Congress to once... again remove from the LGC's
delegated taxing power, all of the franchisee's (Bayantel's) properties that are actually, directly and exclusively used in
the pursuit of its franchise.
LUCMAN V. MALAWI (G.R. NO. 159794)
Facts:
Respondents were the incumbent barangay chairmen of their respective barangays prior to the May 1997 barangay
elections. The May 1997 failed barangay elections resulted to a special election which likewise failed. Consequently,
respondents remained in office in a holdover capacity. Then, LBP was selected as the government depositary bank for
the IRAs of the barangays headed by respondents. Respondents had to open new accounts in behalf of their
government units with the proper LBP branch to withdraw their IRAs but were refused by petitioner unless the
requirements were met Respondents were eventually allowed to open but were not allowed to withdraw the IRA
funds in the absence of the requisite Accountant’s advice. Thereafter, some other persons presented themselves
before petitioner as the new barangays and to them, petitioner released the IRA funds. Respondents moved to
compel petitioner to release to them the IRA funds. RTC and CA ruled in favor of respondents.

Issue:
Whether or not respondents have no legal personality to institute the petition for mandamus in their own names since
the IRAs rightfully belong to the respective barangays and not to them.

Ruling:
By virtue of the deposits, there exists between the barangays as depositors and LBP a creditor-debtor relationship.
Fixed, savings, and current deposits of money in banks and similar institutions are governed by the provisions
concerning simple loan. In other words, the barangays are the lenders while the bank is the borrower.
This Court elucidated on the matter in Guingona, Jr., et al. v. The City Fiscal of Manila, et al., citing Serrano v. Central
Bank of the Philippines, thus:

Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of
bank deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on loans
(Art. 1980, Civil Code; Gullas v. Phil. National Bank, 62 Phil. 519). Current and savings deposits are loans to a bank
because it can use the same. The petitioner here in making time deposits that earn interest with respondent Overseas
Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. The respondent Bank was in turn
a debtor of petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its obligation as a
debtor and not a breach of trust arising from a depository’s failure to return the subject matter of the deposit.
The relationship being contractual in nature, mandamus is therefore not an available remedy since mandamus does
not lie to enforce the performance of contractual obligations.

EVELYN ONGSUCO, ET AL. vs. MARIANO M. MALONESEVELYN ONGSUCO and ANTONIA SALAYA, vs. HON. MARIANO M.
MALONES, both in his private and official capacity asMayor of the Municipality of Maasin, Iloilo.[G.R. No. 182065. October
27, 2009.]
Facts:
Petitioners are stall holders at the Maasin Public Market. After a meeting with the stall holders, Sangguniang Bayan of
Maasin approvedMunicipal Ordinance No. 98-01, entitled "The Municipal Revised Revenue Code."The Code contained
a provision for increased rentals for the stalls and the imposition of goodwill fees in the amount of P20,000.00
andP15,000.00 for stalls located on the first and second floors of the municipal public market, respectively. The same
Code authorizedrespondent to enter into lease contracts over the said market stalls, and incorporated a standard
contract of lease for the stall holders at themunicipal public market.Sangguniang Bayan of Maasin approved
Resolution No. 68, series of 1998, moving to have the meeting declared inoperative as a publichearing, because
majority of the persons affected by the imposition of the goodwill fee failed to agree to the said measure.
However,Resolution No. 68, series of 1998, of the Sangguniang Bayan of Maasin was vetoed by respondent on 30
September 1998. Respondentwrote a letter to petitioners informing them that they were occupying stalls in the newly
renovated municipal public market without anylease contract, as a consequence of which, the stalls were considered
vacant and open for qualified and interested applicants.Petitioners filed a Petition for Prohibition/Mandamus, with
Prayer for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction, against respondent. The
RTC found that petitioners could not avail themselves of the remedy of mandamus or prohibition. Because they failed
to show a clear legal right to the use of the market stalls without paying the goodwill fees and also on theground of
non-exhaustion of administrative remedies. This decision was affirmed by the Court of Appeals.

Issues:
W/N there was a need for the exhaustion of administrative remedies- NOW/N the imposition of the goodwill fees is
valid- NO, it is defective due to lack of public hearings

Held/Ratio:
The rule on the exhaustion of administrative remedies is intended to preclude a court from arrogating unto itself the
authority to resolve acontroversy, the jurisdiction over which is initially lodged with an administrative body of special
competence. Thus, a case where theissue raised is a purely legal question, well within the competence; and the
jurisdiction of the court and not the administrative agency,would clearly constitute an exception.There is no dispute
herein that the notices sent to petitioners and other stall holders at the municipal public market were sent
out,informing them of the supposed "public hearing" to be held on 11 August 1998. Even assuming that petitioners
received their notice, the"public hearing" was already scheduled, and actually conducted, only five days later.This
contravenes Article 277 (b) (3) of the Implementing Rules and Regulations of the Local Government Code which
requires that the public hearing be held no less than ten days from the time the notices were sent out, posted, or
published.When the Sangguniang Bayan of Maasin sought to correct this procedural defect through Resolution No. 68,
series of 1998 vetoed thesaid resolution. Although the Sangguniang Bayan may have had the power to override
respondent's veto, it no longer did so.The defect in the enactment of Municipal Ordinance No. 98 was not cured when
another public hearing was held on 22 January 1999,after the questioned ordinance was passed by the Sangguniang
Bayan and approved by respondent on 17 August 1998. Section 186 of theLocal Government Code prescribes that the
public hearing be held prior to the enactment by a local government unit of an ordinancelevying taxes, fees,
and charges.Since no public hearing had been duly conducted prior to the enactment of Municipal Ordinance No. 98-
01, said ordinance is void andcannot be given any effect. Consequently, a void and ineffective ordinance could not
have conferred upon respondent the jurisdiction toorder petitioners' stalls at the municipal public market vacant.

Palma Development Corporation vs Municipality of Malangas

413 SCRA 572 [GR No. 152492 October 16, 2003]

Facts: Petitioner Palma Development Corporation is engaged in milling and selling rice and corn to wholesalers in
Zamboanga City. It uses the municipal port of Malangas, Zamboanga del Sur as transshipment port for its goods. The
port, as well as the surrounding roads leading to it, belong to and are maintained by the Municipality of Malangas,
Zamboanga del Sur. On January 16, 1994, the municipality passed municipal revenue code no. 09 series of 1993,
which was subsequently approved by the Sangguniang Panlalawigan of Zamboanga del Sur in resolution no. 1330
dated August 4, 1994. Section 56.01 of the ordinance reads as follows:

Sec 56.01 Imposition of Fees. There shall be collected service fee for its use of the municipal roads or streets leading
to the wharf and to any point along the shorelines within the jurisdiction of the municipality and for police surveillance
on all goods and all equipment harboured or sheltered in the premises of the wharf and other within the jurisdiction
of the municipality [xxx]

Accordingly, the service fees imposed by section 56.01 of the ordinance was paid by petitioner under protest. It
contended that under Republic Act No. 7160, otherwise known as the local government code of 1991, municipal
governments did not have authority to tax goods and vehicles that passed through their jurisdictions. Thereafter,
before the Regional Trial Court of Pagadian City, petitioner filed against the Municipality of Malangas on November 29,
1995, an action for declaratory relief assailing the validity of section 56.01 of the municipal ordinance.

Issue: Whether or not the imposition of service fee is proper and valid.

Held: No. By the express language of section 153 and 155 RA 7160, local government units, through their
sanggunian, may prescribe the terms and conditions for the imposition of toll fees or charges for the use of any public
road, pier or wharf funded and constructed by them. A service fee imposed on vehicles using municipal roads leading
to the wharf is thus valid, however, section 133 (e) of RA 7160 prohibits the imposition, in the guise of wharfage fees
— as well as other taxes or charges in any form whatsoever on goods or merchandise. It is therefore irrelevant if the
fee imposed are actually for police surveillance on the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly prohibited by section 133 (e).

Ericsson Telecom vs. Pasig G.R. NO. 176667 November 22, 2007 City Power of Local Taxation
NOVEMBER 10, 2017
FACTS:
Ericsson Telecommunications, Inc. (petitioner), a corporation with principal office in Pasig City (respondent), is
engaged in the design, engineering, and marketing of telecommunication facilities/system. In an Assessment Notice
dated October 25, 2000 issued by the City Treasurer of Pasig City, petitioner was assessed a business tax deficiency
for the years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross
revenues as reported in its audited financial statements for the years 1997 and 1998. Petitioner filed a Protest
claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue.
Respondent issued another Notice of Assessment to petitioner on November 19, 2001, this time based on business
tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93, respectively, based on
its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest, reiterating its position that the local
business tax should be based on gross receipts and not gross revenue. Respondent denied petitioner’s protest and
gave the latter 30 days within which to appeal the denial.
Petitioner filed a petition for review with the RTC of Pasig, praying for the annulment and cancellation of petitioner’s
deficiency local business taxes totaling P17,262,205.66.

ISSUE:
What is the extent of the Power of Local Taxation?

RULING:
The power to tax is primarily vested in the Congress; however, it may be exercised by local legislative bodies pursuant
to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power
may be subject to such guidelines and limitations as Congress may provide. Respondent assessed deficiency local
business taxes on petitioner based on the latter’s gross revenue as reported in its financial statements, arguing
that gross receipts is synonymous with gross earnings/revenue, which, in turn, includes uncollected earnings.
Petitioner, however, contends that only the portion of the revenues which were actually and constructively received
should be considered in determining its tax base.
Thus, respondent committed a palpable error when it assessed petitioner’s local business tax based on its gross
revenue as reported in its audited financial statements, as Section 143 of the Local Government Code and Section
22(e) of the Pasig Revenue Code clearly provide that the tax should be computed based on gross receipts.

PETRON vs. TIANGCO G.R. No. 158881 April 16, 2008 Taxation, LGC
JANUARY 16, 2018
FACTS:
Petron maintains a depot or bulk plant at the Navotas Fishport Complex, and through that depot, it has engaged in
the selling of diesel fuels to vessels used in commercial fishing in and around Manila Bay.
Petron received a letter from the office of Navotas Mayor, respondent Toby Tiangco, wherein the corporation was
assessed taxes relative to the figures covering sale of diesel, stating the total amount due of P6,259,087.62, a figure
derived from the gross sales of the depot from 1997 to 2001. The computation sheets that were attached to the letter
made reference to Ordinance 92-03, or the New Navotas Revenue Code (Navotas Revenue Code), though such
enactment was not cited in the letter itself.
Petron filed with the Malabon RTC a Complaint for Cancellation of Assessment for Deficiency Taxes with Prayer for the
Issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction. The RTC rendered its Decision
dismissing Petron’s complaint and ordering the payment of the assessed amount.
Petron has opted to assail the RTC Decision directly before this Court since the matter at hand involves pure questions
of law, a characterization conceded by the RTC Decision itself. Particularly, the controversy hinges on the correct
interpretation of Section 133(h) of the LGC, and the applicability of Article 232 (h) of the IRR.
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall not extend to the levy of the
following:
xxx
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or
charges on petroleum products;

ISSUE:
Whether a local government unit is empowered under the Local Government Code to impose business taxes on
persons or entities engaged in the sale of petroleum products.

RULING:
Evidently, Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing
powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of
taxes which cannot be imposed by local government units, namely: excise taxes on articles enumerated under the
NIRC; and taxes, fees or charges on petroleum products.
The power of a municipality to impose business taxes is provided for in Section 143 of the LGC. Under the provision, a
municipality is authorized to impose business taxes on a whole host of business activities. Suffice it to say, unless
there is another provision of law which states otherwise, Section 143, broad in scope as it is, would undoubtedly
cover the business of selling diesel fuels, or any other petroleum product for that matter.
As earlier observed, Section 133(h) provides two kinds of taxes which cannot be imposed by local government units:
excise taxes on articles enumerated under the NIRC, as amended; and taxes, fees or charges on petroleum products.
There is no doubt that among the excise taxes on articles enumerated under the NIRC are those levied on petroleum
products, per Section 148 of the NIRC.
The power of a municipality to impose business taxes derives from Section 143 of the Code that specifically
enumerates several types of business on which it may impose taxes, including manufacturers, wholesalers,
distributors, dealers of any article of commerce of whatever nature; those engaged in the export or commerce of
essential commodities; retailers; contractors and other independent contractors; banks and financial institutions; and
peddlers engaged in the sale of any merchandise or article of commerce. This obviously broad power is further
supplemented by paragraph (h) of Section 143 which authorizes the sanggunian to impose taxes on any other
businesses not otherwise specified under Section 143 which the sanggunian concerned may deem proper to tax.

This ability of local government units to impose business or other local taxes is ultimately rooted in the 1987
Constitution. Section 5, Article X assures that [e]ach local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges, though the power is subject to such guidelines and
limitations as the Congress may provide. There is no doubt that following the 1987 Constitution and the Code, the
fiscal autonomy of local government units has received greater affirmation than ever. Previous decisions that have
been skeptical of the viability, if not the wisdom of reposing fiscal autonomy to local government units have fallen by
the wayside.
Respondents cite our declaration in City Government of San Pablo v. Reyes that following the 1987 Constitution the
rule thenceforth in interpreting statutory provisions on municipal fiscal powers, doubts will have to be resolved in
favor of municipal corporations. Such policy is also echoed in Section 5(a) of the Code, which states that any provision
on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers and of the lower local government unit. But somewhat
conversely, Section 5(b) then proceeds to assert that [i]n case of doubt, any tax ordinance or revenue measure shall
be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. And this
latter qualification has to be respected as a constitutionally authorized limitation which Congress has seen fit to
provide. Evidently, local fiscal autonomy should not necessarily translate into abject deference to the power of local
government units to impose taxes.

City of Iriga vs. Camarines Sur III Electric Cooperative, Inc.

Supreme Court (Second Division) G.R. No. 192945 promulgated September 5, 2012Facts:Respondent Camarines Sur
III Electric Cooperative, Inc. (CASURECO), an electric cooperative organized under Presidential Decree(PD) No. 269
and registered with the National Electrification Administration (NEA), is engaged in the business of electric
power distribution to various end-users and consumers within the City of Iriga and the municipalities of Nabua, Bato,
Baao, Buhi, Bula andBalatan of the Province of Camarines Sur (or the Rinconada area).Petitioner City of Iriga
assessed CASURECO deficiency franchise tax and RPT covering the periods 1998 to 2003 and 1995 to
2003,respectively. CASURECO refused to pay and argued that as an electric cooperative provisionally registered with
the CooperativeDevelopment Authority (CDA), it is exempt from the payment of local taxes.Petitioner filed a collection
complaint against CASURECO with the RTC, which ruled that the city’s right to assess RPT for 1995 - 1999had already
prescribed. The RTC also ruled that CASURECO is liable for franchise taxes for 2000 – 2003 based on its gross
receipts fromIriga City and the Rinconada area, on the ground that the “ situs of taxation is the place where the
privilege is exercised.”On appeal, the Court of Appeals (CA) reversed the RTC on the ground that CASURECO is a non-
profit entity which does not fall withinthe purview of businesses enjoying a franchise.

Issues:1. Did CASURECO correctly appeal the RTC decision to the CA? NO2. Is CASURECO liable for franchise tax?
YES

Ruling:1. No. CASURECO should have filed its appeal with the CTA, which has exclusive jurisdiction to review
decisions, orders or resolutionsof the RTCs in local tax cases originally decided or resolved by the RTCs in the exercise
of their original or appellate jurisdiction.2. Yes. CASURECO is liable for franchise tax.PD No. 269, which took effect on
August 6, 1973, granted exemption from the payment of all national and local taxes and fees to electriccooperatives
registered with NEA.RA No. 6939, enacted on March 10, 1990, created and authorized the CDA to register
cooperatives, while RA No. 6938, enacted on thesame day, provides that electric cooperatives registered with NEA
under PD No. 269 which opt not to register with the CDA shall not beentitled to the benefits and privileges under the
law.On January 1, 1992, the LGC took effect and withdrew tax exemptions or incentives previously enjoyed by all
persons, natural and judicial, including GOCCs, except for certain entities, such as cooperatives duly registered under
RA No. 6938.The provisional registration of CASURECO with the CDA, which granted it exemption from payment
of local taxes, was only until May4, 1992. Thereafter, CASURECO was no longer exempt from the payment of local
taxes, including the franchise tax.A franchise tax is “a tax on the privilege of transacting business in the state and
exercising corporate franchises granted by the state.” It isnot levied simply for existing as a corporation upon its
property or on its income, but on its exercise of the rights or privileges granted toit by the government.To be liable
for local franchise tax: 1) one must have a “franchise” in the sense of a secondary or special franchise; and 2) it must
exerciseits rights or privileges under this franchise within the territory of the pertinent LGU.Both requisites being
present, CASURECO is liable to pay franchise tax. Being in the nature of an excise tax, the situs of taxation is
the place where the privilege is exercised. Hence, CASURECO is liable for franchise tax on all its gross receipts from
Iriga City and theRinconada area where it operates, regardless of the place where its services or products are
delivered

PLDT vs. City of Davao, et al. (SC-G.R. No. 143867)

In its Decision dated 22 August 2001, as affirmed in its Resolution dated 25 March 2003, the SC ruled that PLDT’s
exemption from the payment of local franchise tax was withdrawn by R.A. 7160, otherwise known as The Local
Government Code of 1991 or LGC. No amendment to re-enact the previous tax exemption of PLDT was made by
Congress.
Relevant facts

On 3 Aug. 1991, R.A. 7082 was approved, further amending the franchise of PLDT. Section 12 of said franchise
provides that PLDT shall pay a franchise tax “in lieu of all taxes on this franchise or earnings thereof.” Section 12
reads:

The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings, and
personal property, exclusive of this franchise, as other persons or corporations are now or hereafter may be required
by law to pay. In addition thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to three
percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under this
franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof . . .

On 1 Jan. 1992, the LGC took effect. Under this law, provinces and cities are authorized to impose tax on all business
with a franchise and withdrew tax exemptions or incentives presently enjoyed by all persons. Section 193 reads:

Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or
-controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock and
non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.
In 1992, Davao City passed Ordinance No. 159, imposing a tax on businesses enjoying a franchise, at the rate of
seventy-five percent (75%) of one percent (1%).
On 1 March 1995, R.A. 7925 (Public Telecommunications Policy Act of the Philippines ) was approved, providing for the
equality of treatment in the telecommunications industry. The pertinent provision is Section 23, which reads:
Equality of Treatment in the Telecommunications Industry. – Any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted
telecommunications franchise and shall be accorded immediately and unconditionally to the grantees of such
franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications
franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service
authorized by the franchise.

On 2 June 1998, the Bureau of Local Government Finance (BLGF) rendered an opinion to the effect that pursuant to
R.A. 7925, PLDT is exempt from the payment of franchise and business taxes imposable under the LGC.

In January 1999, PLDT applied for a Mayor’s Permit to operate its Davao Metro Exchange. The City of Davao withheld
action on the application pending payment by PLDT of the local franchise tax for the first to the fourth quarter of
1999. PLDT protested the assessment of the local franchise tax and requested a refund of the franchise tax paid by it
for the year 1997 and the first to the third quarters of 1998.

PLDT’s argument and the Supreme Court’s ruling

1. PLDT argued that Smart and Globe are exempt from the franchise tax. Therefore, pursuant to the equality of
treatment provision in Section 23 of R.A. 7925, it follows that PLDT must likewise be exempt from the tax being
collected by the City of Davao. In other words, the grant of tax exemption to Smart and Globe ipso facto extends to
PLDT.
To begin with, tax exemptions are highly disfavored. The rule is that tax exemptions should be granted only by clear
and unequivocal provision of law expressed in a language too plain to be mistaken. Assuming that the
word exemption in Section 23 refers to tax exemption and assuming further that Globe and Smart are exempt under
their respective charters, then this runabout way of granting tax exemption to PLDT is not direct, clear and
unequivocal way of communicating legislative intent.

The term “exemption” in §23 is too general. A cardinal rule in statutory construction is that legislative intent must be
ascertained from a consideration of the statute as a whole and not merely of a particular provision. There is nothing
in the language of §23 nor in the proceedings of both the House of Representatives and the Senate in enacting R.A.
No. 7925 which shows that it contemplates the grant of tax exemptions to all telecommunications entities, including
those whose exemptions had been withdrawn by the LGC.

Indeed, the word exemption in Section 23 does not mean tax exemption. In its original decision, the SC ruled that the
word “exemption” in Section 23 of R.A. No. 7925 could contemplate exemption from certain regulatory or reporting
requirements. In its Resolution on PLDT’s motion for reconsideration, the SC categorically stated that the
term exemption refers to exemption from certain regulations and requirements imposed by the National
Telecommunications Commission.
The best refutation of PLDT’s argument is the fact that after the enactment of R.A. 7925, Congress granted several
franchises with the in lieu of all taxes provision. If the equality clause under Section 23 of R.A. 7925 automatically
extends the in lieu of all taxes clause to subsequent franchises, there would have been no need to expressly include
the clause in these franchises.
2. In its motion for reconsideration, PLDT argued that the legislative intent in R.A. 7925 is to promote the
development of the telecommunications industry and that the way to achieve this purpose is to grant tax exemption
or exclusion to franchises belonging to the industry. Moreover, by using the
words advantage, favor, privilege, exemption, and immunity and the terms ipso
facto,immediately and unconditionally, Congress intended to automatically extend whatever tax exemption or
exclusion that was granted after the LGC, to a holder of franchise enacted prior thereto.

The SC ruled that the thrust of the law is to promote the gradual deregulation of entry, pricing and operations of all
public telecommunication entities. An intent to grant tax exemption cannot even be discerned from the law. The
records of Congress are bereft of any discussion on tax exemption. On the contrary, the sponsorship speech on the
house bill which served as the basis of R.A. 7925 mentioned “equal access clauses† in interconnection
agreements, not tax exemptions.
3. PLDT also argued that the policy behind R.A. 7925 is to promote healthy competition in the telecommunications
industry. This law seeks to rectify the disparate situation wherein some holders of franchise are exempt from local
taxes.

The SC ruled that one can speak of healthy competition only between equals. The in lieu of all taxes provisions in
other franchises cannot be deemed applicable to PLDT, which had virtual monopoly in the telephone service in the
country for a long time, without defeating the very policy of leveling the playing filed of which PLDT speaks.
4. The BLGF rendered an opinion that Section 23 of R.A. 7925 amended the franchise of PLDT and in effect restored
its exemptions from local taxes. Courts should not set aside the BLGF’s contemporaneous construction because (a) its
function is precisely the study of local tax problems and it has necessarily developed an expertise on the subject; and
(b) it enjoys the presumption of regularity in the performance of its duty.

BLGF is not an administrative agency whose findings on questions of fact are given weight and deference in the
courts. The authorities cited by petitioner pertain to the Court of Tax Appeals, a highly specialized court which
performs judicial functions as it was created for the review of tax cases. In contrast, the BLGF was created merely to
provide consultative services and technical assistance to local governments and the general public on local taxation,
real property assessment, and other related matters, among others. The question raised by petitioner is a legal
question, to wit, the interpretation of Section 23 of R.A. No. 7925. There is, therefore, no basis for claiming expertise
for the BLGF that administrative agencies are said to possess in their respective fields.

It is true that the BLGF enjoys the presumption of regularity in the performance of its duty, but this has nothing to do
with the question in this case. This case does not concern the regularity of performance of the BLGF in the exercise of
its duties, but the correctness of its interpretation of a provision of law.

It is noteworthy that, in holding Smart and Globe exempt from local taxes, the BLGF did not base its opinion on
Section 23 but on the fact that the franchises granted to them after the effectivity of the LGC exempted them from
the payment of local franchise and business taxes.

5. PLDT also argued in its motion for reconsideration that the rule of strict construction of tax exemptions does not
apply to this case because the in lieu of all taxes provision in its franchise is more of a tax exclusion.

Exemption is an immunity or privilege; it is freedom from a charge or burden to which others are subjected.
Exclusion, on the other hand, is the removal of otherwise taxable items form the reach of taxation. The SC ruled that
there is no difference between tax exemption and tax exclusion, both in their nature and their effect. Besides, the
uniform ruling of the SC is that the phrase in lieu of all taxes refers to tax exemptions.
6. In its motion for reconsideration, PLDT argued that its franchise is a specific law, and that the LGC is a general law.
Accordingly, the specific law should prevail. Moreover, since the LGC and R.A. 7925 are inconsistent, R.A. 7925 should
prevail considering that it is the subsequent enactment.
The SC already ruled in the case of City Government of San Pablo, Laguna vs. Reyes, that the phrase in lieu of all
taxes found in special franchises should give way to Section 193 of the LGC. As to the alleged conflict between the
LGC and R.A. 7925, the SC held that such conflict does not exist, as discussed above.
Cagayan Electric Power and Light Co. v.City of Cagayan de Oro, G.R. 191761,November 14,
2012DOCTRINE:Failure to appeal to the Secretary of Justicewithin the statutory period of 30 days from the
effectivity ofthe ordinance is fatal to one’s cause.FACTS:OnJanuary10,2005,theSangguniangPanlungsodof Cagayan de
Oro (City Council) passedOrdinance No. 9503-2005 imposing a tax on the leaseorrental of electric
and/ortelecommunication posts, polesor towers by pole owners to other pole users at tenpercent(10%) of the annual
rental income derived fromsuch lease or rental. The City Council, in aletter dated 15March 2005, informed Cagayan
Electric Power and LightCompany, Inc. (CEPALCO), through its President andChief Operation Manager, Ms. Consuelo
G. Tion, of thepassage of the subject ordinance. On September 30,2005, appellant CEPALCO, purportedly on pure
questionof law, filed a petition for declaratory relief assailing thevalidity of Ordinance No. 9503-2005 before the
RegionalTrial Court.HELD: The Court ruled that CEPALCO failed to exhaustadministrative remedies. Section 5 of said
ordinanceprovided that the “Ordinance shall take effect after 15 daysfollowing its publication in a local newspaper of
generalcirculation for at least three (3) consecutive issues.” GoldStar Daily published Ordinance No. 9503-2005 on 1
to 3February 2005. Ordinance No. 9503-2005 thus took effecton 19 February 2005. CEPALCO filed its petition
fordeclaratory relief before the Regional Trial Court on 30September2005,clearlybeyondthe30-dayperiodprovided in
Section 187. CEPALCO did not file anythingbefore the Secretary of Justice. Thus, the Court found thatCEPALCO
ignored the mandatory nature of the statutoryperiods. Q: Is payment under protest required
beforeapartymayappeal totheSecretaryofJustice? No. As held inJARDINE DAVIS INSURANCE V.
ALIPOSA[FEBRUARY 27, 2003],prior payment under protest isnot required when the taxpayer is questioning
thevery authority and power of the assessor to imposethe assessment and of the treasurer to collect thetax (as
opposed to questioning the increase ordecrease in the tax to be paid). Q: What authority is given to the
Secretaryof Justice with respect to review of taxordinances? The Secretary of Justice can declare an
ordinancevoid for not having followed the requirements of thelaw but he cannot replace it with his own law or
hecannot say that is is unwise. InDRILON V. LIM[AUGUST 4, 1994],then Secretary of Justice Drilonset aside the
Manila Revenue Code on two grounds,namely the inclusion of certain ultra viresprovisionsanditsnon-
compliancewiththeprescribedprocedure in its enactment. In ruling that the act ofthen Secretary Drilon was proper, the
SupremeCourt noted that whentheSecretary alters ormodifies or sets aside a tax ordinance, he is notallowed to
substitute his own judgment for thejudgment of the LGU that enacted the measure.
Inthesaidcase,SecretaryDrilononlyexercisedsupervision and not control